You are browsing the archive for inequality.

When Federal Contracts Turn Into Corporate Welfare

7:30 pm in Uncategorized by Michelle Chen

Image: AFL-CIO’s Executive Paywatch

Originally published at In These Times

Where does the corporate bottom line end and the public interest begin? Through the voodoo economics of federal contracting, Washington’s “partnerships” with private corporations have drained the public trust straight into the pockets of top corporate executives.

The progressive think tank Demos calculates in a new research report that private contractors have funneled up to $24 billion in federal funds into executive salaries. Yet, according to the analysis, the same system of contracted firms—from defense manufacturers to concession stands at national tourist sites—also employs hundreds of thousands of poverty-wage workers at the bottom.

Federal contractors are currently subject to a very loose limit on the amount of an executive’s salary that can come directly from federal subsidies: about $763,000. Extrapolating from survey data on the top contractor executive salaries fromthe Government Accountability Office, Demos estimates the aggregate share of public money that is ultimately funneled into executive pay at $23.9 billion.

Besides taxpayers, those who stand to lose most from these skewed CEO pay schemes may be the low-wage laborers carrying out the actual work of the contract projects, such as repairing a school or building a bridge. These are the workers featured in another recent Demos analysis of contractors, showing that “an estimated 560,000 Americans employed by federal contractors were paid $12 an hour or less.”

Demos points out that the government could save taxpayers a hefty sum by simply shrinking the CEO portion of contractor payments. For example, by capping it at the level of the U.S. vice presidential salary, taxpayers could save “$6.97 to $7.65 billion.” Theoretically, under a more equitable pay distribution, that sum would be enough to significantly lift the lowest tier of worker wages:

If taxpayer-funded payouts for these executives were capped at $230,700—the salary of the U.S. Vice President—the pay of hundreds of thousands of low-wage federal contract workers could be raised by as much as $6.69 per hour or $13,902 per year for a full-time worker, without costing taxpayers an additional dime.

Demos notes that these are “conservative estimates” based on extrapolated data. Researchers based the analysis on a representative sample of defense contractors evaluated by the Government Accountability Office, with some adjustments for civilian contractors. The takeaway is that while legions of workers struggle to survive on the wages paid through federal contracts, the same grants are fattening the wallets of some of the wealthiest executives in the country. Read the rest of this entry →

The Boss Man Cometh: Through State Tax Breaks, Employers Pilfer Workers’ Earnings

6:46 pm in Uncategorized by Michelle Chen

Cross-posted from In These Times.

As you file your taxes this week, before complaining about how much you’re forking over to Uncle Sam, bear in mind that the tax man might not be the only one you’re writing a check to: Your boss might be getting a big cut, too.

Thanks to arcane state tax subsidies, thousands of companies have fattened their profit margins by poaching from workers’ paychecks. According to a report by the watchdog group Good Jobs First, nearly $700 million in taxpayer money is being siphoned off by corporations annually through clever deals with state governments that are supposedly aimed at “job creation.”

According to the report, the tax breaks allow companies to effectively skim money from workers’ state income tax withholdings “to provide lavish subsidies to corporations rather than paying for vital public services.” The beneficiaries include “more than 2,700 companies, including major firms such as Sears, Goldman Sachs and General Electric.”

These programs feature glowingly euphemistic names: Indiana’s Economic Development for a Growing Economy (EDGE) Tax Credit, the Mississippi Advantage Jobs Incentive Program, and, to emphasize that these aren’t just any old jobs we’re talking about, New Mexico’s High Wage Jobs Tax Credit. Read the rest of this entry →